[Question] Non resident selling property in South Africa - Tax implications?

[Eastboy]

Hello

My uncle (non resident) owns a property approx 4ha in size in South Africa.
Property developers are interested in purchasing the land, and he is looking for R30 000 000

My basic research online leads me to this conclusion as regards the tax payable.

Sale R 30 000 000.00
7.5% withholding tax R 2 250 000.00


Tax due R 1 656 601.00
+ 45% over R1 656 601 R 12 754 529.55
Total Tax due R 14 411 130.55

Is this correct or have I got the calculations completely wrong?
Thanks

[Andromeda]

Hi Eastboy

The withholding tax, which is levied on the sale price, is meant to ensure that the seller complies with CGIT requirements. In other words it is like provisional tax and is deducted from the final tax payable, if any.
1. Your uncle should register as a tax payer in RSA
2. He should account for the disposal in the usual CGIT manner, which is for starters deduct annual exclusion, deduct base cost, apply inclusion rate then apply the CGIT rate.

From SARS' brochure:
The base cost of an asset acquired on or after 1 October 2001 generally comprises the actual expenditure incurred on the asset. In order to qualify for inclusion in base cost, such expenditure must appear on the list of qualifying expenditure in paragraph 20 of the Eighth Schedule. Some of the main costs that qualify to be part of the base cost of an asset include –
• the costs of acquisition or creation of the asset;
• the cost of valuing the asset for the purpose of determining a capital gain or capital loss;
• the following amounts actually incurred as expenditure directly related to the acquisition or disposal of the asset, namely –
 the remuneration of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal advisor, for services rendered;
 transfer costs;
 securities transfer tax, transfer duty or similar tax or duty;
 advertising costs to find a seller or to find a buyer;
 the cost of moving that asset from one location to another;
 installation costs including foundations and supporting structures;
 donations tax limited by a formula;
 cost of an option used to acquire or dispose of the asset;
• cost of establishing, maintaining or defending a legal title to or right in the asset;
ABC of Capital Gains Tax for Individuals (Issue 12) 3
• cost of effecting an improvement to or enhancement of the value of the asset; and
• value-added tax incurred on an asset and not claimed as an input tax credit for value-added tax purposes.

The withholding tax will generally exceed the final CGIT payable which is meant to ensure that a proper return is submitted by the seller.